UPDATED: Microsoft said it plans to offer a version of Windows in European markets with its media player stripped out by January, following a European court ruling that upheld antitrust penalties against the company.

The ruling Wednesday by the European Court of First Instance is a blow to Microsoft, which had asked the EU high court to suspend antitrust penalties levied by the European Commission while its larger appeal worked its way through European courts.

The decision not only impacts the playing field for European competitors of Microsoft, but is expected to hit companies whose products have been built to be compatible with Microsoft's Windows Media Player within Windows.

Brad Smith, Microsoft's senior vice president and general counsel, said it was too soon to say if the company would appeal this ruling, but stressed that Microsoft would immediately begin complying with the penalties.

"Even if we make an appeal, we have to move forward with compliance," he said during a conference call Wednesday. "We're committed to working with the commission's staff."

That means two things: offering a version of Windows in Europe without media player, and opening up more access to its Windows server technology to more competitors.

He said Microsoft would launch a Web site later Wednesday where competitors can start to collect information about licensing Microsoft's server communications protocols.

"There will be particular steps the company will go through," he said. Already, Microsoft offers server licensing protocols to over 20 companies as part of its earlier antitrust settlement with the U.S. government.

"To a fair degree, that experience will apply going forward in Europe," he said. "And I would generally expect that competitors would be looking for protocols that are not already available."

The Free Software Foundation Europe (FSFE), which had intervened in the European Commission's antitrust case against Microsoft, called the ruling a win for European consumers and said it was happy to see competition reestablished in the server market.

"Microsoft now will have to explain how they have arbitrarily modified public standards they use in their servers and work hard to re-establish competition in the small server market," said Carlo Piana, the attorney representing the foundation. "On the other end, we are sure that it is an opportunity for the market to compete on quality of code and services, respecting interoperability," he said in a statement to internetnews.com.

"This is a great success of an international community that is really able to coordinate and obtain excellent results: technical, legal and political. We have always thought that Microsoft's arguments were poor and we are glad we were able to
explain this to the judge so well," said Stefano Maffulli, Italian Chancellor of the FSFE.